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Aon sued over £176 million Las Vegas arena project

A joint venture between two US construction firms has accused international brokerage Aon of professional negligence in its placement of a wrap-up insurance policy for a Las Vegas stadium.

Hunt Construction and Penta Building, the contractors of the T-Mobile Arena, have filed a complaint against Aon Risk Services South, which they asked to advise regarding the wrap-up insurance program for the project.

The contractors alleged that Aon claimed to be "a leader in construction project wrap-ups” and that it was experienced and skilled in providing professional services related to the insurance program.

“However, Aon did not perform the contract as it warranted. Instead, Aon breached its obligations to Hunt/Penta by rendering its professional services negligently, and as a result, Hunt/Penta has suffered substantial damages,” the firms said in their complaint.

In June 2014, Aon agreed to provide insurance and financial risk management support services related to the wrap-insurance policy for the 20,000-seat arena.

If designed and administered properly by Aon, the wrap-up insurance program would have resulted in decreased project costs and increased profits to the contractors and savings to the project owner.

The contractors said the building price of the T-Mobile Arena was supposed to be about US$230m (approximately £176 million), but the final construction costs exceeded that amount.

According to the complaint, Aon initially told the firms that the subcontractor deducts for the project would be $4.5m, based on the broker’s actual experience in Nevada.

However, Aon later confessed that it had no actual experience in the state, the contractors alleged.

More than a year later, Aon claimed that as of November 2015, the subcontractor deducts would be approximately US$1.3 million less than it initially represented.

“Defendants were negligent in performing their calculations of the Subcontractor Deducts. Defendants' negligence is self-evident from the fact that their calculations differ from the Subcontractor Deducts actually recognized on the T-Mobile Arena Project by some $1.3 million,” the contractors said in their complaint.

They said the broker “significantly misrepresented” and “vastly overstated” the subcontractor deducts.

The firms said Aon should have followed the same procedure an insurer writing a worker's compensation insurance policy in Nevada would have taken to determine the premium for the policy.

Aon allegedly breached “fiduciary-like” obligations when it failed to disclose its lack of experience in the Nevada insurance market and its mistakes in providing services, the contractors claimed.

“Furthermore, Aon breached the duty of good faith and fair dealing inherent in every contract when it failed to disclose its lack of experience in the Nevada insurance market and failed to disclose its mistakes in providing its services to Hunt/Penta,” they said.

Since the referendum on 23 June 2016, there has been a lot of uncertainty in many sectors, but for the UK's insurance and long-term savings industry, the largest in the EU and third largest worldwide, the shockwaves are likely to be felt for some time